Netflix coming to cable boxes?

Netflix may be on the verge of getting its streaming video service embedded in cable companies’ set-top boxes, according to Reuters, citing “sources familiar with the matter.” The report has Netflix CEO Reed Hastings meeting with cable companies to discuss the possibility of offering Netflix streaming as an on-demand option for cable subscribers. If the idea comes to pass, it could mark another step on Netflix’s apparent strategy to become a premium content provider, a la HBO or Showtime.

Although nothing has been announced, the report has Netflix meeting with cable companies to discuss offering Netflix streaming as an add-on service that would be billed as part of a customer’s cable service, in much the same way premium channels like HBO, Showtime, and Netflix-defector Starz can be now. Netflix could be looking at deals with cable companies as a way to expand its potential audience beyond folks willing to hook up specialized boxes like a Roku, Apple TV, or a TiVo DVR, or access Netflix streaming through a home theater PC or game console — there are plenty of consumers out there who just want a “cable box” (and one remote) that can do it all.

For the cable companies, deals with Netflix could represent a significant business reversal. Cable operators have traditionally looked at “over-the-top” Internet streaming services like Netflix as competitive threats that encourage consumers to drop their expensive (and profitable) cable programming and just use broadband Internet access. However, by doing deals to bundle in Netflix service, cable companies could turn Netflix into a reason for customers to keep their cable service.

However, while Netflix has significant market momentum, cable operators haven’t been sitting idly by, wondering what to do about the popularity of streaming video. Verizon has just inked a deal with Redbox to launch a Netflix competitor, and Comcast is rolling out StreamPix, its own streaming service intended to keep customers paying their cable TV bills and eschewing over-the-top streaming offerings.

Netflix may face additional challenges in inking deals with cable networks: many of Netflix’s content licenses do not include rights to deliver shows via cable television, so Netflix would either have to work out new and/or additional deals with studios, or let cable companies bear the licensing burden, offering only content that a particular cable company has rights to carry.